MGEA02H3 Lecture Notes - Lecture 5: Marginal Product

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA02H3
• Professor: Gordon Cleveland

Document Summary

Government revenue is area c on the graph at the right. That area is x 35 = ,750. Excess burden (the economic loss due to taxation) is area e, ( x 5)/2 = . Cost of the tax to the taxpayers per dollar of revenue raised is the sum of these divided by the revenue raised or ,875/,750 = . 07. You need to remember that apl = q/l and. Mpl = q/ l, and you can fill in the following table: You will notice that the marginal product is computed and written in at the midpoint between the quantities of labour, because we are using a discrete rather than a continuous measure of change. If we wanted to do this problem using calculus, we would set apl = q/[0. 05q2 . 0. 85q + 12. 8] and mpl = dq/dl = 1/[dl/dq] = 1/[0. 1q 0. 85] to find the maximum point for ap, set dapl/dq = 0, that is,